Friday, March 03, 2006

How to Deflate a Housing Bubble

Editor’s Note: Given the current state of government oversight over our public capital markets, in which attorneys working for the SEC issue subpoenas for phone records of investigative journalists who dare investigate publicly traded corporations—as opposed to those attorneys going after the phone records, for example, of message board stock manipulators or corporate executive stock manipulators—the writer of this blog is no longer willing to speak his unadulterated mind.

The following reflects the New, Always-Upbeat World of Free Speech which seems to be preferred by the same SEC that regularly shuts down hedge funds after the principals have absconded with the cash and which was unable to detect and prevent the collapse of numerous Bubble-Era companies, including Enron, whose former Chairman and former Chief Operating Officer are now on trial for allegedly hiding that collapse from public investors whom the SEC was supposed to protect, following the Hovnanian conference call yesterday.

“We are projecting margins to be lower than we have had for the last few years,” a very savvy member of the top-flight home-builder Hovnanian’s management team said on yesterday’s superb and highly upbeat conference call.

“Although it’s too early for a formal EPS projection for fiscal ’07,” the superlative management executive continued, “we expect to see a similar trend to what we are projecting this year—further reductions in gross margins offset by further gains in deliveries and revenues, resulting in an increased EPS.”

I have no doubt that this strategy—of homebuilders seeking to make up in volume what they are losing in price—will have the most salutary and beneficial impact on the current housing situation in the United States, which, in the New, Always-Upbeat World of Free Speech, I should describe as not a bubble but more a nice warm bath.

Jeff Matthews
I Am Not Making This Up

© 2005 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations.


Meme chose said...

This is precisely the point from which most British humor derives.

The British are 'subjects', not 'citizens' (they play around with the terminology from time to time, but that's the history and the substance). They don't have what have been American free speech protections, so they continuously evolve a parallel language which everybody can understand, but which is designed to make litigation more difficult.

This is often of course also very funny (see the long history of British satirical publications such as Punch, Private Eye, etc. in which it doesn't take long to work out that e.g. the classic and oft-repeated description of a journalist or politician as 'overtired' means hopelessly drunk, and so on).

It's all endlessly amusing, although in the end I think pernicious because the jokes get more and more sophisticated and 'insider' in nature. The language ends up becoming Balkanized, and able people spend more time thinking up 'clever-silly' things to say than making serious judgements about what is happening in front of them.

The awful truth, evidenced by many British people, is that if you cease speaking your unadulterated mind you may risk losing it.

Barry Ritholtz said...

Jeff, why do you hate America ?

IMHO said...

Excellent disclaimer.

Unbelievable how a huckster can talk up a stock but no one can attack one.

namazu said...

In other news, a widely respected retired insurance executive indicated today that he might step down from his chairmanship of a rapidly-growing Intenet retailer. His wisdom and regard for the company's shareholders are evidenced by the following observations: that the current CEO is brilliant, that they do not share the same taste in hobbies, and that at the end of the day, family is more important than profession.

As much as anyone, Jeff Matthews knows I'm not making this up...

CanuckInTX said...

Interesting how they think they will drive more volume even though the reductions in prices are being forced upon them by a lack of buyers.